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Screenshot of a breaking news alert e-mail from Q2 2017
The company (unknowingly) engaged in offering managed discretionary accounts
The Australian regulator ASIC has issued a press release that details an enforceable action against online forex broker Forex Financial Services Ltd (Forex FS). An investigation which was carried out by Australian authorities has found that between March 2010 and October 2011 the brokerage has been offering an individually managed account (IMA) which was effectively a managed discretionary account (MDA).
According to Australian law the company was not allowed to offer such services since it has to be registered as a managed investment scheme. The investigation uncovered that the funds deposited by 34 customers of the company, totaling more than $2.6 million were not operated as the above mentioned way.
ASIC considered that the firm has received a misleading advice that made it classify its IMA clients as wholesale instead of retail entities. According to commissioner Greg Tanzer the MDA service allows a brokerage to enter and exit trades on behalf of the client without seeking his consent. He added that if the service was not provided properly clients could face significant losses of principal.
The regulator proceeds to detail that the firm has made potentially misleading representations on its website by stating the past performance of the investment products. Potential clients are always placing heavy reliance on these results when in fact the outcome can be completely different since market circumstances are constantly changing. Hence a disclaimer that past performance does not guarantee future results is a must according to Mr Tanzer.
ASIC’s enforceable action requires the firm to seek an independent expert that has to assess the compliance of the company’s products and services to existing regulations and act on his recommendations. The company is forbidden to offer MDA services to retail clients in the next 10 years and it must ensure that the directors of the firm engage in professional education within the next 12 months.
For the full press release visit ASIC’s website.